How Rick Perry Wants to Use Block Grants to Have His Cake and Eat It Too

If you've been reading Burnt Orange Report, you know how Governor Rick Perry's refusal to expand Medicaid under the Affordable Care Act is hurting Texans.

Perry has already made it clear that he will not expand Medicaid at all. But that doesn't mean he wants to leave the program the way it is.

Earlier this year, Perry petitioned the Obama administration for a Medicaid block grant, a type of grant that would give him federal money with few strings attached that regulated how he spent it. He'd asked for the same in 2011 and 2008, getting denied every time. That hasn't stopped Perry from continuing to push for Medicaid block grants.

Medicaid block grants are a policy proposal we've seen from Republicans time and time again. The GOP claims block grants will save Medicaid, but they are really an insidious Republican tactic to shrink Medicaid and insure fewer poor people overall. These claims are often cloaked in policy jargon, which makes it tough to understand how this plan works.

Luckily we've got you covered–read a full explanation of how block grants hurt Medicaid, and why Rick Perry wants them after the jump.What are block grants?

Block grants are “fixed-sum federal grants to state and local governments that give them broad flexibility to design and implement designated programs.”

How are they different from other types of federal grants?

Block grants are one of two major types of federal grants. The other type are categorical grants, which make up most of current federal aid. Categorical grants can only be used for very narrowly defined purposes set out by the federal government when it awards the money.

Why request a block grant over a categorical grant?

Proponents of block grants say “block grants allow local governments more freedom to design programs, simplify administration of funds, and improve consumer access to social services.” Critics point out that block grants offer little accountability and essentially give recipients free rein to use the funds as they please.

What does Perry want to do with a Medicaid block grant?

One thing Perry wants to do is expand asset testing as a qualification for Medicaid eligibility. Asset testing is when a family's assets and resources, such as a house or a car, are included in calculating Medicaid eligibility. Perry and other conservatives claim this is to make sure only the most needy people receive Medicaid. However, health care advocates argue “that asset testing contributes to the cycle of poverty, because the moment people earn enough money to cover transportation or a home, their health benefits are knocked out from under them,” forcing them to continue to struggle. Asset testing isn't allowed under the Affordable Care Act, one of the ways the ACA increases Medicaid eligibility. This is one way Perry wants to use block grant Medicaid “reform” to limit the number of people eligible for health insurance in Texas.

As the Texas Tribune reported in September, Perry also requested that the state be able to make changes to Medicaid without federal approval, and charge co-payments and premiums for Medicaid.

In the current system, Texas receives roughly $60 in federal matching funds for every $40 the state spends on Medicaid services. If Texas … finance[d]Medicaid through a block grant, the state would receive a predetermined amount of federal financing to run the program. … If the state expanded Medicaid under the … Affordable Care Act, the federal government would cover 100 percent of Medicaid expansion enrollees' health care services for three years, then … reduce the matching rate to 90 percent.

How were Perry's proposals received?

The proposal has been fairly unpopular, except among conservatives. The Texas Hospital Association criticized Perry's block grant proposal, arguing that by increasing the number of uninsured Perry's plan would contribute to “higher premiums, higher local taxes, and difficulty attracting companies to our state.”

Most agree that it's highly unlikely that the Obama administration would grant Perry's request.

Would a block grant save the state money?

When the federal government funds Medicaid, the commitment is open-ended–they'll pay what the state needs that year. A block grant would be a lump sum each year that the state can use as it wishes.

This means that when there are additional unforeseen costs, someone would have to cover them. With a block grant, this would be the state. For example, during a recession where there were more unemployed and poor people, the state would have to foot the bill for the additional Medicaid recipients. Ultimately, if states wanted to maintain Medicaid, the block grant plan would probably end up costing them more.

Of course, Republicans like Governor Perry have got that part covered. As a Heritage Foundation analyst stated, block grants “get rid of 'perverse incentives for states to bring as much into their Medicaid umbrella as possible.'” Or, in other words, turning Medicaid into block grants would give Republican governors the excuse they need to stop providing health care for all those pesky poor people.

So, why does Governor Perry want block grants?

Perry's official claim is that a block grant “should give Texas the flexibility to transform our program into one that encourages personal responsibility, reduces dependence on the government, reins in program cost growth and efficiently improves coordination of care.”

In reality, what a block grant allows him to do is receive a lot of money from the federal government without accountability standards, so he can do what he wants with it. And what he wants to do is slash Medicaid so fewer poor people receive insurance coverage. In fact, because a block grant gives the state less money over time than the categorical grants he's refusing, Perry has a built-in excuse to continue cutting Medicaid rolls.

Like most of his policy decisions, this seems to be a strategic move for Perry to maintain his Tea Party credentials for a future presidential run. It's certainly not designed to help uninsured Texans–if it were, he wouldn't focus all his attention on lowering Medicaid eligibility. In fact, if he were really dedicated to helping the uninsured, we wouldn't even be having this conversation, because he would have accepted federal funding to expand Medicaid under the ACA and given 1.3 million Texans basic coverage.

Unfortunately, we have a governor who has proven time and time again that he cares more about his own interests than Texans' interests. As long as politicians like Perry continue to put partisanship over people, Texans will continue to suffer.

About Author

Katie grew up in Austin and has been involved in Texas politics since 2004. She has been a part of several campaigns, from state house races to working at President Obama's campaign headquarters in 2012. She loves public policy, public health, and tacos.
Katie tweets from @kasingh19.